India is considering returning to buying Russian crude amassed in floating storage in Asia as the war in Iran and Tehran’s retaliatory strikes in the region have severely disrupted oil flows from the Middle East.
The state-held refiners of India, the world’s third-largest oil importer, and Indian government officials met over the weekend to discuss emergency supply plans following the major escalation in the Middle East. These plans include a potential return of Indian refiners purchasing Russian oil, sources with knowledge of the discussions told Bloomberg on Monday.
Considering the massive disruption to flows in the vital Strait of Hormuz, Indian oil ministry officials are pushing the foreign affairs ministry to pursue a leeway from the United States for imports of Russian oil, millions of barrels of which are sitting idled near major hubs in Asia, according to Bloomberg’s sources.
India’s current commercial and strategic crude reserves could be sufficient to cover only two weeks of consumption, the sources have told the publication.
India has just pivoted away from Russian crude oil purchases to appease Washington in the U.S.-India trade talks and to comply with the U.S. sanctions on Russia’s top producers and exporters, Rosneft and Lukoil.
India has drastically reduced intake of Russian crude in recent weeks, while boosting imports from the Middle East, Venezuela, West Africa, and the Americas.
However, the all-but-halted traffic via the Strait of Hormuz is putting major importers, including India, on high alert that their vital crude supply is at risk.
India and China are the dominant buyers of crude transiting the Strait of Hormuz, while a massive 85% of India’s liquefied petroleum gas (LPG) supply passes through this waterway, according to estimates by Kpler.
“With Middle East barrels facing logistical disruption, both India and China face strong incentives to deepen reliance on Russian supply,” Kpler’s Amena Bakr wrote in a note on Sunday.
“India faces the most acute near-term exposure and is likely to pivot towards Russian crude immediately, given proximity and established logistics.”
By Tsvetana Paraskova for Oilprice.com
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